One of the U.S. largest Retail REITs, Realty Income Corp (NYSE:O), disclosed an investment of around $950 million to acquire a stake in a joint venture that owns a 95% interest in the real estate assets of The Bellagio Las Vegas at a $5.1 billion valuation.

The company is buying the 21.9% indirect stake in the property from Blackstone Real Estate Income Trust, Inc. of Blackstone Inc (NYSE:BX) for around $300 million.

Meanwhile, BREIT will retain a 73.1% indirect stake, and MGM Resorts International (NYSE:MGM) will have a 5.0% ownership in the asset.

Apart from this, Realty Income will acquire a yield-bearing preferred equity interest in the joint venture for $650 million.

The transaction is anticipated to close in fourth quarter (Q4) of 2023, subject to customary closing conditions.

The Bellagio, situated at the center of the Las Vegas Strip, is subject to an existing triple net lease with around 26 years of remaining term and is operated and maintained by MGM.

The existing Bellagio triple net lease structure includes 2% annual rent escalators for the next six years, the greater of 2% or CPI (capped at 3%) in seven to 16 years, and the greater of 2% or CPI (capped at 4%) in 17-26 years.

"We are pleased to initiate our Credit Investment platform through a preferred equity investment in the Bellagio joint venture. Credit Investments are a natural adjacency to our traditional business, allowing us to provide additional value to our clients while leveraging our core competencies in transaction sourcing and structuring, and real estate and credit underwriting and monitoring." said Sumit Roy, President and Chief Executive Officer.

As of June 30, Realty Income had $3.5 billion of liquidity, comprising cash and cash equivalents of $253.7 million.

Price Action: Realty Income shares are trading higher by 0.41% at $56.59 premarket on the last check Friday.

Image: Bellagio Las Vegas